Iran's Bark Bigger Than Bite on Oil

Iran's threat to keep its oil off the world market if the West tightens sanctions would not likely have much impact on world oil prices, already trading at a three-month low.

Iran's Oil Minister Rostam Qasemi told reporters Tuesday that Iran could survive without oil revenue, and that it would keep its oil off the market if the sanctions intensify. Qasemi said that Tehran is prepared to run the country without oil revenue and that they had a "Plan B" contingency strategy.

"It will hurt the world, but a lot less than it would have six months ago," said Trevor Houser, partner with Rhodium Group. "Right now in today's market, the impact of 800,000 barrels a day disruption—it would be meaningful, but limited." Europe imposed sanctions against purchases of Iranian oil this past summer, and the U.S. outlawed dealings with Iran's central bank. The West has also gone after shippers that move Iranian crude.

Houser said a year ago Iran would have been exporting about 2.5 million barrels a day, well above the current 800,000. Its biggest customer is currently China, which purchases 300,000 to 400,000 barrels a day. Turkey imports 100,000 to 200,000 of Iranian crude, and Japan imports 100,000. India is also an importer of oil from Iran.

Iran's Impact on Oil Prices

CNBC's Sharon Epperson reports how traders are weighing signs of worsening tensions in the Middle East against persistently weak demand for oil.

"I think now in terms of pressure on the Iranian economy, and the Iranian regime, it's not oil exports that are going to be the primary variable to watch any more. They've gotten pretty low. The incremental impact that's going to have on the reduction we've already seen from 2.5 million barrels a day has brought about a balance of payments crisis for Iran," Houser said. "What's going to make a difference is how successful the government is in preventing capital flight."

Houser said if Iran's oil completely left the market, prices would probably rise by several percent. World oil markets are well supplied with increased pumping from Saudi Arabia and Iraq. There is also more oil production coming from the U.S. Oil prices were sharply lower Tuesday, as oil sold off with stocks and on concerns of weak demand. (Read More: We'll Go 100% Renewable Energy, Says Saudi Arabia)

Houser said there are far more disruptive things Iran could do than shut off its oil. For instance, it could block the Strait of Hormuz, a major shipping lane, or use covert military attacks against Israel or Saudi Arabia.

"There's still a lot of ways Iran could make trouble, but their stick has gotten a lot lighter," he said.